S&P swings ax as ratings cuts come fast and furious

As a result of Standard & Poor's downgrade of the long-term sovereign credit rating of the U.S., the ratings agency is following up with a host of further downgrades today. Most involve a lowering of credit ratings to double A+ from triple A. As of this afternoon, 10 of the 12 Federal Home Loan Banks have been cut, together with the senior debt issued by the FHLB system and the senior debt issued by the Federal Farm Credit Banks, as well as the senior issue ratings on Fannie Mae and Freddie Mac. In addition, Standard and Poor's cut ratings on 126 Federal Deposit Insurance Corp.-guaranteed debt issues from 30 financial institutions sold under the Temporary Liquidity Guarantee Program and four debt issues guaranteed under the Temporary Corporate Credit Union Guarantee Program. U.S.-guaranteed bonds issued by Israel also were downgraded. The corporate credit ratings of the Army and Air Force Exchange Service, the Navy Exchange Service Command and the Marine Corp. Community Services were lowered to double A- from double A. The organizations run merchandising businesses for military personnel. Also getting hit were The Depository Trust Co., National Securities Clearing Corp. the Fixed Income Clearing Corp., and the Options Clearing Corp., all going to double A+ from triple A. Standard & Poor's has concerns that falling securities prices could increase margin calls, decrease capital and collateral, and harm clearinghouse members' ability to pay. Five U.S. insurance companies suffered the same fate. The long-term counterparty credit and financial strength ratings on the member companies of the Knights of Columbus, New York Life Insurance Co., The Northwestern Mutual Life Insurance Co., the Teachers Insurance and Annuity Association of America and United Services Automobile Assocation were cut to double A+, based on their large holdings of Treasury bonds. Standard & Poor's lowered the ratings on approximately $17 billion of securities issued by New York Life, Northwestern Mutual, TIAA and USAA. Five industrial revenue bonds were also cut today. At the same time, the ratings agency cut the credit outlooks on insurers Assured Guaranty Ltd., Berkshire Hathaway Life Insurance Co., Guardian Insurance and Annuity Co., the Massachusetts Mutual Life Insurance Co. and Western & Southern Financial Group, from stable to negative. More downgrades could be coming. Last month, Standard and Poor's put many of the entities that it cut today on credit watch lists. But many more borrowers were also put on watch lists last month, including: • Almost 3,000 pre-refunded municipal bonds. • 206 investment funds in the U.S., Europe and Bermuda, due to exposure to U.S. Treasury and U.S. government agency securities. • 604 structured finance transactions worth $373.7 billion. • A range of municipal housing issues backed by the U.S. • Eight federal leases. • The Tennessee Valley Authority. • The Bonneville Power Administration.